Public Bank, among Malaysia's top three banks, has entered into a conditional sale and purchase agreement with the Estate of the Late Tan Sri Dr Teh Hong Piow and Consolidated Teh Holdings (ConTeh) to acquire a stake in LPI Capital.
Public Bank was founded in 1966 by the late Tan Sri Dr Teh Hong Piow. LPI Capital, 42.74% owned by ConTeh (a private investment vehicle of the Teh family) fully owns the general insurance company Lonpac Insurance. LPI Capital, listed on the Main Market of Bursa Malaysia, has been operating for over 60 years and is mainly involved in the underwriting of general insurance. Lonpac Insurance currently has 21 branches throughout Malaysia and one branch in Singapore. It also operates in Cambodia through an associated company.
The stake in LPI Capital to be acquired consists of 175,896,000 ordinary shares, representing approximately 44.15% equity interest in LPI Capital, for a total cash consideration of MYR1.72bn ($401m).
Strategic opportunity
Speaking at a press conference after the agreement signing ceremony, Tan Sri Dr Tay Ah Lek, managing director and CEO of Public Bank, said, “The proposed acquisition represents a strategic opportunity for Public Bank to further expand its general insurance segment into the Malaysian market through the LPI Group. This will allow the enlarged Public Bank Group to establish an immediate market presence and a strong foothold in the general insurance segment in Malaysia as a comprehensive complementary service to its current financial services and family takaful offerings.”
He added, “The proposed acquisition is also in line with our Group’s plans to expand beyond just organic growth but through strategic acquisitions to expand our product and service offerings as evident from our recent completion of the acquisition of Public Bank Securities Vietnam Company Limited which allowed our Group to expand our financial services offering in Vietnam with the inclusion of securities trading services.”
He said, “This strategic acquisition of LPI Group, a long-established and leading general insurance player in Malaysia, represents a clear and unique opportunity for us to accelerate our vision to move towards a “Universal Banking Model” that offers a comprehensive and diverse range of financial and other related products and services under the same group.
“With our existing network of over 260 branches located throughout the country, LPI Group would be able to leverage and expand its distribution channels and further grow its general insurance business in Malaysia.”
In addition, Public Bank would also be able to tap into the sales and distribution network of LPI Capital and further expand its reach to cover the latter’s customers.
Aside from the mutual cross-selling of products and services, Public Bank and LPI Capital will also explore possibilities in developing new integrated products and services catering to customers’ financial and insurance needs.
As this is a related-party transaction, the proposed acquisition is subject to the approval of the non-interested shareholders of Public Bank at an extraordinary general meeting to be held at a later date. Should the proposed acquisition be approved at the EGM, Public Bank will be obliged to extend an unconditional mandatory take-over offer for the remaining equity interest in LPI Capital not already owned by it.
Public Bank has received the approval of the Ministry of Finance and Bank Negara Malaysia for the proposed acquisition and is expected to complete this corporate exercise in the first quarter of 2025.
Legacy
At the same press conference, Ms Teh Li Shian Diona, the youngest daughter of the late Tan Sri Dr Teh Hong Piow also announced that the Estate and ConTeh intend to undertake a restricted offer for the sale of a portion of their Public Bank shares, progressively over five years and will be in compliance with the Financial Services Act.
Ms Teh said, to honour her father’s legacy, “We will be undertaking an exercise to distribute a portion of our Public Bank shares at a discount to all employees, directors, and eligible shareholders of the Public Bank Group. This initiative aims to ensure that Public Bank remains in the hands of those who have nurtured its growth and success over the years, enabling us to continue building our legacy together.”
She added, “Although we will be streamlining our stake, I would like to take this opportunity to reiterate our firm and unwavering commitment to continue as the major shareholders of Public Bank.”